Source: Wall Street

Us tech giant Intel Corp fell short of expectations again in the fourth quarter, marking the ninth time in the past 10 quarters that the company's results have fallen short of market expectations. The company's performance guidance for the first quarter of this year is regarded as a "disaster".

After the US stock market opened on Thursday, January 26th, Intel Corp announced his results for the fourth quarter and full year of 2022.

Intel Corp's fourth-quarter results failed to meet market expectations due to a larger-than-expected decline in PC chip sales and fierce competition in the lucrative server hardware market. this is also the ninth time in the past 10 quarters that the company's performance has fallen short of market expectations.

According to the financial report, Intel Corp's fourth-quarter revenue was $14 billion, below market expectations of $14.58 billion, the lowest quarterly income since 2016, a sharp drop of 32% compared with the same period last year and a drop of 28%. Full-year revenue was $63.1 billion, down 20% from the same period last year, a decline of 16%.

Fourth-quarter earnings per share were $0.16 per share and $0.10 per share under non-GAAP, significantly below market expectations of $0.16 per share; full-year earnings per share were $1.94 per share and $1.84 per share under non-GAAP.

The guidance given by Intel Corp in the first quarter of this year is regarded by the market as a "disaster". Intel Corp expects revenue in the first quarter of 2023 to be between $105 and $11.5 billion, well below market expectations of $14 billion, and if first-quarter results fall at the low end of the guidance, first-quarter revenue will be the lowest since 2010; it is expected to lose $0.80 per share in the first quarter and 15 cents per share under non-GAAP, well below market expectations of $0.25 per share.

Intel's shares fell 9% in after-hours trading after the earnings announcement.

In the fourth quarter, Intel Corp's gross profit margin fell sharply to 39.2 per cent from 53.6 per cent in the fourth quarter of 2021, with a net loss of $700m, while gross profit under non-GAAP fell from 55.8 per cent to 43.8 per cent and net profit plunged 92 per cent to $400m.

David Zinsner, chief financial officer of Intel Corp, said:

Despite the adverse macroeconomic and market environment, Intel Corp continued to make good progress in its strategic transformation in the fourth quarter, including advancing our product roadmap and improving our operating structure and processes to improve efficiency. at the same time, it has achieved the performance within the scope of our performance guidance.

In 2023, we will continue to address short-term challenges while working to meet our long-term commitments, including providing leading products based on open and security platforms, supported by large-scale manufacturing and supported by our excellent team.

In the fourth quarter of last year, we took steps to adjust the size of our organization and rationalize our investments, giving priority to areas where we can provide the highest value in the long run. These actions consolidate our cost-cutting target of $3 billion in 2023 and lay the foundation for cost-cutting of $8 billion to $10 billion by the end of 2025.

Cash cow business fell sharply less than expected

From the perspective of the split business, in the fourth quarter of last year, Intel Corp's client computing business unit, which is regarded as Intel Corp's cash cow, including PC chips, contributed US $6.63 billion in revenue, down 36% from the same period last year and lower than the market consensus of US $7.68 billion. Some analysts pointed out that the performance of the department this quarter was the biggest contraction in the sector since the 1990s.

Intel Corp's data center and artificial intelligence departments recorded revenue of $4.3 billion in the fourth quarter, down 33% from a year earlier, but still slightly higher than the market consensus of $4.17 billion.

The revenue of Intel Corp's network and innovation department, including network products, was 2.06 billion US dollars in the fourth quarter, down 1 percent from the same period last year and lower than the market consensus of 2.26 billion US dollars.

Market position is shaken, competitors' challenges are intensified, and Intel Corp is facing difficulties.

Media analysts said Intel Corp's financial report reflected the numerous challenges facing Intel Corp that had crippled the company before the downturn in its main source of income, the PC chip market. In the chip sector, the earnings report is further proof that the company lags further behind its main competitors Taiwan Semiconductor Manufacturing Co Ltd and Samsung of South Korea.

To get back on track, Intel Corp needs his downstream company, computer manufacturers, to quickly process chip inventory and resume ordering components. This will help Intel Corp's financial situation, but Intel Corp's ambitious reform plan has stretched the company's financial position.

The computer industry is undergoing a huge adjustment. Intel Corp's revenue decline partly reflects the sharp decline in the PC market in recent months. PC shipments fell 28.5% in the fourth quarter of last year, the worst decline since tracking the market began in the 1990s, according to research firm Gartner. Consumer spending has been hit by rising interest rates by developed market central banks in response to soaring inflation and rising fears of a possible recession.

PC shipments fell 16% year-on-year in 2022 and will fall again to 260 million units this year, according to Gus Richard, an analyst at Northland Securities. Intel Corp predicts that global PC shipments this year will be at the low end of his forecast range of 270 million to 295 million units.

Intel Corp still dominates the server processor market, with a global market share of more than 70 per cent. But its position in this lucrative market has declined, and the company has been slow to launch new products in recent years, while competitors such as AMD and ARM have repeatedly reaped gains. Some customers are still developing self-developed chips to replace Intel Corp processors. All this is a painful setback for Intel Corp, who once controlled 99% of the processor market.

Edit / Viola